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Essilor Chief Aims to Reassure Employees, Stockholders as Governance Issues Continue

Essilor’s Hubert Sagnières released a letter that he sent to Essilor’s global managers renouncing the accusations made in the French press by Luxottica head Leonardo Del Vecchio that Essilor had breached the combination agreement at the heart of the EssilorLuxottica merger. It is the latest in a week-long dispute that has Del Vecchio claiming Essilor is in defiance of the agreement, and Sagnières accusing Del Vecchio of instituting a power grab.
 
Arbitration Request: Last night Delfin, Del Vecchio’s holding company and the top shareholder in EssilorLuxottica, filed an arbitration request to verify its claims of violations of the merger agreement. The request was filed with the International Chamber of Commerce.

Stocks Fall: As the dispute continues in the international financial press, Reuters is reporting that EssilorLuxottica shares are falling as a result of the top-level squabble. According to Reuters, “EssilorLuxottica shares were down 1.5% by 0811 GMT, among the worst performers on Paris’ benchmark CAC-40 index.”

Sagnières’ letter is addressed to Essilor’s global managers and stockholders. It was made public yesterday in order to answer what he called an “unprecedented and unfounded” media campaign by Del Vecchio that have left employees and stakeholders unsettled.

The letter states: “Among the core principles [of the combination agreement] were, and are today, both a balanced governance with equal powers between Mr. Del Vecchio, as Executive Chairman, and me, as Executive Vice Chairman, and the absence of control of EssilorLuxottica by Delfin. Recent statements by Mr. Del Vecchio in the press claiming Essilor has breached the Combination Agreement by hiring four key executives, thereby blocking the appointment of joint key executives, are unfounded and reflect an attempt by Delfin to destabilize Essilor.”
 
The dispute began months ago when it was reported that Del Vecchio told Italian media that he would push for Luxottica CEO Francesco Milleri to be the CEO of the merged EssilorLuxottica. The official combination agreement calls for Del Vecchio and Sagnières to share chairmanship roles in the new company and a search to be instituted for someone to take the CEO role. Del Vecchio’s statement reportedly riled the Essilor leadership, and Del Vecchio backed away from it.  

The issue heated up in earnest last week as Del Vecchio’s Delfin said in a statement that Essilor was in violation of the merger agreement, something Del Vecchio then reiterated in an interview with French publication Le Figaro. (Read about it here.)

Last week, Sagnières issued a statement to answer those claims, calling Del Vecchio’s statements “serious and false accusations.” The letter said that “Despite [Del Vecchio’s] denials, a certain number of his accusations reflect a de facto attempt to take control of the new Group, without any premium offered to shareholders.”
 
As the governance dispute continues, Sagnières’ latest letter is intended to reassure managers and shareholders, he says, that despite Del Vecchio’s claims, he intends to ensure the governance model outlined by the combination agreement is followed.

You can read the entire letter here.
Sagnières states: “Recent statements by Mr. Del Vecchio in the press claiming Essilor has breached the Combination Agreement by hiring four key executives, thereby blocking the appointment of joint key executives, are unfounded and reflect an attempt by Delfin to destabilize Essilor. We staffed Essilor International (CGO) SA (now EssilorLuxottica) further to the hive-down in November 2017 of all activities of Essilor International (CGO) SA to Essilor International SAS. This was a requirement of the Combination Agreement to ensure that an appropriate management team required for a holding company of a listed group would be immediately in place. These executives benefit from a provision that allows them to be transferred back to Essilor International SAS if their employment agreements at EssilorLuxottica are terminated as a result of the hiring of joint executives. To be clear, Luxottica representatives knew of this hiring at the time of the closing of the transaction in October 2018. Recent media reports suggest special arrangements were made for these individuals. However, there is no ‘golden parachute,’ no ‘blocking of positions,’ and no ‘violation of the Combination Agreement.’ Delfin’s statements are simply inaccurate.”

He concludes:” Though it brings together two unique companies in managerial culture and style, I firmly believe the combined EssilorLuxottica remains a formidable partnership. I will continue to ensure we accelerate operational efficiencies rather than becoming derailed by governance matters that often only reflect personal ambitions. The search for a future CEO of EssilorLuxottica is a priority for the success of the Group, and I give my full support to this effort. We must dedicate our energy to integrating the two businesses, understrong leadership, and implementing the synergies that we have promised to the market.”
—Susan Tarrant